One of Australia’s top insurance companies has warned petrol prices may remain at unprecedented levels throughout the duration of Russia’s invasion of Ukraine.
NRMA spokesman Peter Khoury said many Australians could expect to pay staggeringly high prices of more than $2 per litre (US$5.51 per gallon) when at the pump.
“In Australia, most capital cities by the end of this week or early next week will see two dollars a litre on average,” Khoury told AAP.
“That’s the first time it has ever happened. There’s really no end in sight ... We’re struggling to be able to point to any factors globally that will provide any sort of short-term relief.”
It comes as governments and oil companies alike have begun to declare they will no longer be accepting oil from the world’s biggest exporter—including U.S. President Joe Biden and oil and gas giant Shell.
“The latest Russian invasion of Ukraine has just escalated the increases to a whole new level ... [The prices] have gone up about $US50 ($A69) a barrel this year alone,” Khoury said.
“Unfortunately as long as Russia continues its aggressive war against Ukraine and with the impacts of sanctions as a result of that, these prices are going to be hanging around for a while,” he said.
Amongst the list of sanctions laid against Russia, Biden described the decision to cut off as “another powerful blow to Putin’s war machine,” referring to the severing of the large amount of wealth Russia normally generates from oil exports.
Although Australian drivers have taken a hit, Australia itself does not directly import oil from Russia, with more than half of refined oil coming from South Korea and Singapore.
Energy economist at Curtin University’s Oil and Gas Innovation Centre, Roberto Aguilera, said much of the price rise could be explained by “fears of escalating conflict, and further sanctions and oil disruptions.”
However, Aguilera said the planned kickstart to oil production in Australia could alleviate some of the strain.
“New oil production is still expected within the first half of the year. This should help bring crude and fuel prices down,” Aguilera said.
“Otherwise, we are going to have huge inflation problems,” independent senator Rex Patrick warned in a Sky News interview on Mar. 7.
Food prices are also expected to rise as a result of supply chain disruptions due to extreme flooding throughout New South Wales and Queensland, along with the fact that both Russia and Ukraine are major suppliers of grain and vegetables.
As a consequence, Reserve Bank Governor Philip Lowe expressed a similar sentiment to Patrick, stating that the price hike for both oil and food could further fuel inflation.
“The risks on inflation have certainly moved to the upside,” Lowe told the Australian Financial Review business conference on Mar. 9.
